New study of Seattle's $15 minimum wage says it costs jobs

Bruno Cirelli
Giugno 27, 2017

To review, the timeline seems to have gone like this: The UW shares with City Hall an early draft of its study showing the minimum wage law is hurting the workers it was meant to help; the mayor's office shares the study with researchers known to be sympathetic toward minimum wage laws, asking for feedback; those researchers release a report that's high on Seattle's minimum wage law just a week before the negative report comes out.

The study by the National Bureau of Economic Research is the latest to examine Seattle's aggressive steps since 2014 to raise the minimum wage to the highest levels in the US, adding to a growing debate over whether such an approach is helpful or hurtful to the workers meant to benefit. This is logical, but often needs to be articulated given many appeals to the effects of past increases in wage floors as evidence for new much higher minimum wages (see the "Fight for 15", for example).

Incremental minimum wage increases, tailored to specific cities' needs, may be a viable anti-poverty tool in some cases. Tyler Scheffler, 26, is a student at Seattle Central College who works 40 hours a week at a Walgreens in Ballard. The relationship between these two effects - the "elasticity" - tells you whether more or less money is flowing to low-wage workers in general. It estimates there would be 5,000 more such jobs without the Seattle law.

Anecdotally, there are plenty of horror stories about the effect of minimum wage increases on small businesses. The result is that total pay for such jobs lowered low-wage employees' earnings by an average of $125 a month.

Fugere says he's always supported a $15 minimum wage, and still does. That resulted in a 6 percent drop in what employers collectively pay - and what workers earn - for those low-wage jobs.

The study, which was commissioned by the Seattle City Council, analyzed quarterly hours and earnings data from the Washington Employment Security Department, which administers unemployment insurance. A better solution is the federal earned income tax credit, which boosts take-home pay by offering a taxpayer-financed subsidy for low-wage work. Advocates of minimum-wage hikes routinely decry the plight of low-wage earners (and not for no good reason), but the impact of this policy doesn't improve their lives; it actively makes matters worse. Seattle raised the minimum wage for large employers from $9.47 to $11 an hour in 2015 and then to $13 an hour in 2016 as part of a gradual phase-in to $15.

The truth is more nuanced, and unearthing it requires the kind of study being conducted by a team at the University of Washington. This suggests that there may have been even greater job losses for low-paid workers in those bigger businesses.

Such dramatic wage increases traditionally have been eyed with suspicion by economists, because basic supply and demand suggests that sharply raising wages is going to lead to fewer jobs and other cutbacks.

To try to isolate the effects of the minimum-wage law from other factors, the UW team built a "synthetic" Seattle statistical model, aggregating areas outside King County but within the state that had previously shown numbers and trends similar to Seattle's labor market.

This is precisely what happened in Seattle.

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